Lipscomb professor says interest rate hike can help 'cool off' economy

Federal Reserve Rate Hikes Impact
Posted at 10:04 PM, Jun 15, 2022
and last updated 2022-06-15 23:14:29-04

NASHVILLE, Tenn. (WTVF) — In a week as hot as this, Tennesseans are all looking for ways to beat the heat.

And while discussing nationwide economic policy might not be as fun as a day at a splash pad for kids, the Federal Reserve is essentially trying to do to the economy the same thing that a splash pad is trying to do to kids: cool things down.

Experts at Lipscomb University said there has been a heatwave in the economy the last few years, with record highs on Wall Street, and 50-year-low unemployment.

But that’s led to the inflation Tennesseans experienced: paying more for the same thing, even impacting prices at the pump.

To combat that inflation, the Federal Reserve raised interest rates Wednesday, three-quarters of a percent: the largest hike in 28 years.

In the short term, it means it will be harder for those to borrow money.

The cost of buying cars, homes, and anything else through a loan or credit, will go up.

But experts said the hope is that it will discourage people from spending as much, eventually forcing down both prices and increases in inflation.

"If a lot of people stop buying goods and services, demand starts to go down, then prices are going to go down as well," said Lipscomb business professor Julio Rivas.